Thursday, July 6, 2017

The Tie Goes to the State

Illinois passed it's first budget in three years today by raising personal and corporate income taxes and by overriding the governor's veto, which was accomplished by several Republican senators going along with the action.

Rep. David Harris of Arlington Heights said he supported the budget plan because it is "immoral" for the state to carry a huge backlog of bills and pay $800 million in late-payment interest.

He compared the standoff to a game of "chicken."

"If it requires some of us to blink to save our state, so be it," Harris said.

If budgetary showdowns are merely a game, then one rule is becoming clear: the tie goes to the state. As governments grow insolvent, they face a dilemma. Either they reduce spending (shrink the state) or they increase taxation (grow the state). When things do come to an impasse, you can safely bet on growth of the state. House Republicans under Paul Ryan wrote Barrack Obama a blank check, and now Illinois Republicans are batting for the left as well.

A Democrat stronghold, Illinois is a high-tax welfare state dominated by Chicago politicians. 90% of the state is effectively a fiefdom held by that city-state in the northeast corner. Much of the financial woes come from the egregious moral hazard of deferred spending in the form of pensions. State pensions are such a scam that they ought to be forbidden by the constitutions in all 50 states. Pensions are a great way for politicians to buy votes and be long-gone before the bill comes due. Well, the bill is coming due. The decision to raise the state income tax from 3.75% to 4.95% is not, in isolation, an extreme measure, but Illinois already has high sales taxes, high excise taxes (on gasoline, alcohol, etc) and very high property taxes. The median household income in Illinois is $60K, which means the median increase in tax burden is $720 per family. That's quite a burden on an income of $60K where they're already paying twice the national real estate taxes and a hell of a lot more for gas and booze than we are just across the Mississippi River.

The bill was the work of Democratic House Speak Michael Madigan, who commented:

The people in this chamber did not do what was easy today. But we did what was right for the future of our state.

What utter nonsense. This was the easiest, most short-term possible solution for the budget crisis. The other two options were (1) to continue to do nothing, which would have exposed themselves to unrelenting pressure as the state's budgetary fiasco was drawing the national spotlight, or (2) to address the spending that had outpaced revenues by over $6 billion a year, and make painful budget cuts that would draw endless rage from aggrieved groups (mostly liberals). Those are both much more difficult options. Throwing money at the problem so it will go away for a while is always the easiest short-term solution, especially when it's other people's money. Perhaps you could argue the tax raise was absolutely necessary to avoid the junk rating that would further degrade the budget condition, but to claim their course was the difficult one, or the best long term answer, is a bold lie.

Now, the sad part of all this, is that this is a terrible outcome for conservatives, because it is a short-term fix whose expense is put onto the citizenry. I mentioned back when RinoCare was in the news that if we can't fix healthcare, we at least want to make sure the burden is put onto the state, not us. Increasing state debt speeds up its inevitable demise. In the meantime, tax payers need to have every possible asset available to become personally prepared for any calamity, which they can't do if they are being sucked dry to prop the state up. Our order of preference should be something like this:

Conservative solution (small state)

Accelerationism

Band-aid fixes

Liberal solution (communism, basically)

This budget is somewhere between 3 and 4. It would have been better for the typical downstate Illinois taxpayer if there was no tax increase at all and the state continued to collapse under the weight of its own debt. Instead the state's tentacles have dug even further into the taxpayer wallets. The state in its death throes will always try to suck the people dry to save itself.

1 comment:

I came from Illitax and left because the cost of living was too high while the job opportunities were too low. It seems that all the states are heading in the same direction as Illinois, just at different speeds.